Wall Street with lead feet after the publication of the numbers relating to the US labor market: the Dow Jones lost 0.10% to 36,199 points; the S&P loses 0.08% to 4,692 points, while the Nasdaq is -0.18% to 15,053 points. Ten-year Treasury rates are up slightly around 1.75%. The dollar is under pressure after the disappointing employment report, leading the euro to rise more than 0.20% to around $ 1.2320.
The Nasdaq, which the day before yesterday suffered the strongest daily loss in almost a year, or since February 2021, slipping by 3.34%, is preparing to conclude the worst week ever since February 2021, discounting the rotation of the investors from growth stocks to value stocks. The S&P 500 and the Dow Jones begin to close the first week in the red of the last three.
The December US employment report confirmed operators’ fears about the risk of a continuing flare-up in US inflation, indicating, among other things, growth in new jobs by about half compared to consensus forecasts. In fact, just 199,000 new jobs were created in December, below the growth expected by the consensus, equal to +400,000 units, and even more disappointing than the estimates of the Goldman Sachs economists, which were for a growth in payrolls of 500,000 units. The figure came closest to Morgan Stanley’s outlook – doing worse and worse -, with analysts forecasting growth in new jobs of just 260,000 in December. The US unemployment rate fell from the previous 4.2% to 3.9%. In this case, the number was better than the consensus expected, which had predicted a decline to 4.1%.
The labor force participation rate rose slightly to 61.9% compared to the previous 61.8%: however, the figure remains well below the 62.8% prior to the Covid-19 pandemic.
The parameter included in the employment report, which measures the inflation trend, is worrying: that of hourly wages which, on average and on an annual basis, have jumped by 4.7%, to the record of recent decades and over + 4.2% estimated by consensus. On a monthly basis, growth was + 0.6%, over the expected + 0.4%.
The wage trend rekindles fears about a more hawkish Fed, a dominant theme in this first week of trading in the new year, which has destroyed the first earnings of 2022 reported by Wall Street. Minutes from the last central bank meeting in 2021 revealed the Fed’s intention to raise fed funds rates earlier or faster and also to reduce its monster balance by $ 8.8 trillion. which triggered the sell-offs in global equities, triggering 10-year Treasury rates upwards, up to 1.75% in yesterday’s session, compared to 1.51% at the end of 2021.
That said, Goldman Sachs believes longer-term US Treasury yields will remain low, even as the Federal Reserve begins to hike rates. The sudden spurt of these first sessions of the new year, which has filled the pages of the financial newspapers, will remain limited for Goldman Sachs. Analysts, while revising the two-year rate target upwards, thus left the outlook on 5, 10 and 30-year Treasury rates, expected by the end of 2022, at 1.8% and 2% respectively. and 2.25%. Goldman instead revised upwards, in fact, the estimates on two-year rates – more sensitive to forecasts on monetary policy – from 1.15% to 1.35%.
In general, the economists of the Wall Street giant believe that there will be “three hikes (in fed funds rates by the Fed) by the end of 2022 (as also emerges from the Fed’s dot plot) and three hikes. year in subsequent years “.
Among the titles protagonists of today’s session, focus on the GameStop meme stock, flown by more than + 23% in the premarket after the spread of some rumors, according to which the company is launching a division to develop a market for non-fungible tokens (NFT). The video game retailer is renovating and President Ryan Cohen has already contacted executives from various companies, including Amazon, to bring GameStop more and more to e-commerce.
On the other hand, Starbucks, which pays for the downgrade of RBC and Oppenheimer, is bad: both brokers have explained the move with the possibility that the stock has already reached its short-term record, and that the group is destined to struggle to witness a further profit growth.